If you are like me, you probably don't want to open a bill when you get it. You put it in your bill pile to be dealt with later that month.

But what if you are in trouble financially and you know the bill isn't going to be paid later that month. It probably goes in a different pile. IT sits there and sits there and in the meantime the creditors start to call, the IRS begins the wage garnishment process, and you may even get sued.

When the debt gets to the point where you have created a “special” pile for it, and the calls are coming in, you need to understand your options.

Bankruptcy is a powerful option that many with debt problems wait to consider until they are already in real trouble.

Bankruptcy is found in the U.S. Constitution and it allows for the modification of the ways your debts can be collected.

The initial modification of the creditors ability to collect is found at 11 USC Sect. 362. This code section empowers the bankruptcy court to stop collection activity by almost all creditors, including the IRS.

Once the collection activity is stopped. The rest of the Bankruptcy Code kicks in.

The Bankruptcy Code forces your creditors into categories and than can eliminate many of those categories entirely. Other categories of debt like new tax debt, don't always get eliminated, but they can often by adjusted in a way that allows you to more easily find a way to pay them.

The first question you must answer when deciding whether bankruptcy should be considered is whether or not you can deal with your creditors without it's protections. Do you have funds sufficient to make reasonable offers to settle? If so, are you willing to accept the negative aspects of settling debt?

If you don't have funds to try to convince the creditors to settle, are you susceptible to levy, garnishment or seizure, ie. do you have wages or assets?

If so, and the pile of bills you haven't looked at for a while is large, there is probably good reason to at least speak to an Attorney who is knowledgeable about bankruptcy.

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About the Author

Michael Anderson has been representing Arizonans with tax debt problems for almost two decades and has helped his clients eliminate millions of dollars in tax debt. His tax debt practice is limited to helping individuals and the self-employed who have serious IRS and other debt problems. He provi...

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